Reasons to be long USD/HKD - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 18, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Guatemala) - Analysts at Nomura explained their reasons for being long USD/HKD remain intact We see little change in our rationale to be long USD/HKD, with China’s economic concerns and Hong Kong’s significant dependence on the mainland.

    Hong Kong’s total trade with China amounted to 52.2% of its total trade in 2014, while average corporate revenue dependence on China from the top ten companies in the Hang Seng Index (by market cap) stood at 64% over the same period.

    Because of growth concerns about China over the medium term and faster-than-expected RMB depreciation in December 2015 (we view the recent RMB stability as temporary), we believe the headwinds for Hong Kong will continue for some time.

    Nomura’s Chief US economist Lewis Alexander also maintains the view that the Fed will hike rates by a further 50bp (two 25bp hikes) this year, with the next hike likely at the June 2016 meeting. Because of the USD/HKD peg regime, hikes from the Fed will also be followed by hikes from Hong Kong. With the significant buildup in private sector nonfinancial credit (around 293% of GDP in Q2 2015), this will raise further risks to Hong Kong’s economy and capital outflows.
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